Q1 (May July 2011) Report on the 1 st Quarter 2011/12 of Zumtobel AG

Transcription

1 Q1 (May July ) Report on the 1 st Quarter /12 of Zumtobel AG

2 Overview of the First Quarter /12 >> 9.3% year-on-year increase in Group revenues >> Continued dynamic momentum in the Lighting Segment with plus 11.6% >> Revenue growth in Components Segment slows to 3.8% >> Revenues from LED products nearly double (plus 91.0%) >> Substantially higher selling and R&D expenses to support growth strategy >> Adjusted EBIT at prior year level with EUR 18.2 million (Q1 2010/11: EUR 18.3 million) Key Data in EUR million Q1 /12 Q1 2010/11 Change in % Revenues Adjusted EBITDA as a % of revenues Adjusted EBIT (0.3) as a % of revenues EBIT (8.9) as a % of revenues Net profit for the period as a % of revenues Cash flow from operating results Investments July Change in % Total assets 1, , Equity (0.1) Equity ratio in % Net debt Headcount incl. contract worker (full-time equivalent) 7,887 7, Development of Business by Quarter Revenues (in EUR million) Adjusted EBIT % % 9% 6% 3% 6.1% 5,6% 9.5% 5.4% 4.4% Q1 Q2 Q3 Q4 0 Q1 Q2 Q3 Q4 Revenues FY 2010/11 Revenues FY /12 Adjusted EBIT FY 2010/11 (in EUR million) Adjusted EBIT FY /12 (in EUR million) Adjusted EBIT FY 2010/11 in % of revenues Adjusted EBIT FY /12 in % of revenues (

3 Letter to Shareholders Dear Shareholders, In the first quarter of the /12 financial year the Zumtobel Group recorded revenues of EUR million. That represents an increase of 9.3% over the rather weak first quarter of the previous year. The major drivers for both segments were once again the trend toward more energy-efficient lighting and the significant potential of LED technology. The regional focus of our first quarter growth was the D/A/CH region (Germany, Austria, Switzerland), a key market for the Zumtobel Group. Sound development was registered, in particular, by the Lighting Segment which was driven by a more active renovation sector. Segment revenues rose by 11.6% to EUR million and again clearly outpaced the stagnating commercial construction sector. Revenue growth in the Components Segment slowed after a dynamic upturn that lasted nearly two years, with segment revenues increasing by only 3.8% to EUR million for the first quarter of /12. This more moderate development resulted mainly from de-stocking by OEM customers. Our LED business continued to record further solid development, with a plus of 91.0% in revenues to EUR 36.6 million for the first quarter and an increase in the LED share of Group revenues from 6.4% to 11.2%. Harald Sommerer The development of revenues in the first quarter met our expectations, but earnings growth was limited by several factors. In addition to planned investments in the expansion of sales and an increase in research and development to support our growth strategy, earnings were negatively influenced above all by stronger growth in the lower-margin luminaire business compared with the Components Segment. Adjusted EBIT reflected the prior year at EUR 18.2 million for the first quarter of /12, while the adjusted EBIT margin declined from 6.1% to 5.6%. The expansion of business and higher inventories of raw materials and finished goods led to an increase in working capital during the first quarter. In particular, the Components Segment was unable to reduce stocks by the expected amount over the summer. Working capital requirements as a percentage of rolling 12- month revenues equal 22.4% and are currently outside the Group s defined target corridor of 18% to 20%. The related cash outflows and continuing substantial investments in the Group s expansion resulted in negative free cash flow of minus EUR 37.6 million which, however, still represents a slight improvement over the previous year (minus EUR 38.3 million). With an equity ratio of 35.4% (37.1% as of ), the balance sheet structure of the Zumtobel Group remains solid. Guidance remains but uncertainty is increasing The past months were characterised by growing uncertainty over the possible effects of the current financial market turbulence and the massive sovereign debt in key industrial countries on the real economy. We are therefore monitoring economic developments intensely. For our Lighting Segment, we expect steady high demand over the coming months. The higher margin Components Segment has seen increasingly limited visibility during recent months and, from the current point of view, we cannot predict whether the present reserved demand will strengthen to produce the necessary growth during the coming autumn. Against this backdrop, our guidance for the /12 financial year remains in place (Group revenues approx. +10% and adjusted EBIT margin slightly higher than 6.4%), but we see substantially greater uncertainty over the further development of business. Harald Sommerer Chief Executive Officer 3

4 The Zumtobel Share Capital markets negatively influenced by uncertainty The first quarter of the /12 financial year, especially up to the end of the reporting period, was characterised by growing uncertainty on the capital markets. The leading Austrian ATX index which also includes the Zumtobel share lost more than 8% during the period from May to July. Numerous shares that previously recorded above-average gains were faced with heavy profit-taking. This was also true for the Zumtobel share, which recorded sound development in 2010/11 with a plus of 50%. The share price fell by one-third during the first quarter of /12 to EUR In addition to pessimistic economic reports and confidence indicators, negative statements by competitors and analysts on the development of the construction industry and the lighting business increased the downward pressure on the share price. The market capitalisation of the Zumtobel Group equalled EUR 711 million at the end of July based on an unchanged number of 43.5 million shares outstanding. The shareholder structure remains stable, with the Zumtobel family holding 35.39% of voting rights. On 13 May Zumtobel AG was informed that Delta Lloyd Asset Management NV held 6.78% of the shares outstanding, while FMR LLC (Fidelity) notified the company on 17 May that it had reduced its stake to 9.99%. The average daily turnover rose from 144,946 in the first quarter of 2010/11 to 169,042 for the reporting period (double-count, as published by the Vienna Stock Exchange). The company held 395,582 treasury shares as of 31 July. Development of the Zumtobel Share 180% 160% 140% 120% 100% 80% Zumtobel AG ATX Key Data on the Zumtobel Share for the 1st Quarter /12 Closing price at EUR Currency EUR Closing price at EUR ISIN AT Performance 1st quarter /12 (33.2)% Ticker symbol Vienna Stock Exchange (XETRA) ZAG Performance last 12 months 12.5% Market segment Prime Market Market capitalisation at EUR 711 Mio Reuters symbol ZUMV.VI Share price - high at EUR Bloomberg symbol ZAG AV Share price - low at EUR Datastream O:ZAG Ø Turnover per day (shares) 169,042 Number of issued shares 43,500,000 4

5 Group Management Report The economic environment Up to the publication of this quarterly report, the Organisation for Economic Cooperation and Development (OECD) and the International Monetary Fund (IMF) had not yet revised their global economic forecasts to reflect the possible effects of the turbulence that has characterised the financial markets since the beginning of this summer. In April the IMF forecast global economic growth of 4.3% for the current calendar year and 4.5% for However, many experts expect the increasing economic risks and uncertainty will be reflected in a slowdown during the second half of. These risks are related, above all, to the massive sovereign debt in key industrial countries and the resulting unpredictable effects on the global economy. The Zumtobel Group is closely monitoring these international developments and early economic indicators. Increasing risks for global growth Significant Events since The 35th annual general meeting on 22 July approved the payment of a EUR 0.50 dividend per eligible share for the 2010/11 financial year. This dividend was distributed on 29 July. AGM approves dividend for 2010/11 No other significant events occurred after. Related Party Transactions The members of the Management Board and Supervisory Board of Zumtobel AG are considered to be related parties. As of 31 July there were no business relationships between the company and related parties. The provision of goods and services to associated companies is based on normal market conditions. Revenues >> 9.3% year-on-year increase in Group revenues >> Double-digit growth in Lighting Segment >> Revenue growth in the Components Segment slows to 3.8% >> Revenues from LED products nearly double (plus 91.0%) In the first quarter of /12 (1 May to 31 July ), Group revenues rose by 9.3% year-on-year to EUR million (prior year: EUR million). Energy efficiency remained the central driver for both segments of the Zumtobel Group, with the trend to intelligent, energy-efficient lighting systems and LED technology providing key impulses for growth. The Lighting Segment, with the Zumtobel and Thorn brands, continued the sound growth trend that began in the second half of 2010/11. Segment revenues rose by 11.6% to EUR million for the first quarter (prior year: EUR million), driven by a more active renovation sector. With these results, the Lighting Segment again clearly outpaced the stagnating commercial construction sector. The Components Segment followed sound revenue development in 2010/11 (plus 19.3%) with much slower growth in the first quarter of /12. Revenues increased 3.8% to EUR million (prior year: EUR million). The supply problems for electronic parts eased notably during the past six months. Tridonic luminaire customers are now reducing stock levels because of the fully re-established capability of components producers to supply electronic ballasts and growing uncertainty over the economy. The past months also saw an accelerated decline in the demand for magnetic ballasts. These developments were Group revenues plus 9.3% Double-digit revenue growth in Lighting Segment Slower revenue growth in Components Segment 5

6 contrasted during the first quarter by the expansion of the LED product portfolio and light management systems (Controls & Systems), which supported revenue growth in the Components Segment. Segment development in EUR million Q1 /12 Q1 2010/11 Change in % Lighting Segment Components Segment Reconciliation (20.0) (19.1) 4.8 Zumtobel Group Revenues from LED products nearly double The Zumtobel Group recorded continued dynamic growth in LED technology during the past quarter. Revenues from the sale of LED products rose by 91.0% to EUR 36.6 million (prior year: EUR 19.1 million) and raised the LED share of Group revenues to 11.2% for the reporting period, compared with 6.4% in the first quarter of 2010/11. In particular, the Lighting Segment, with its innovative LED product portfolio, was able to benefit significantly from the strong rise in the demand for LED lighting. LED revenues in this segment rose by 148.2% to EUR 26.6 million. The EUR 50 million framework agreement concluded with SPAR Austria in June further illustrates the breakthrough of this future-oriented LED technology in the high-volume, general lighting business. The successful entry of the Zumtobel brand in LED facade lighting is demonstrated by a further recently finalised project in Asia. In the Galleria Centercity, a shopping centre in Cheonan/Korea, Zumtobel has developed and implemented a lighting solution for one of the largest media facades in the world (12,600 sqm) with over 22,000 LED light points. LED revenues in the Components Segment rose by 31.4% to EUR 12.0 million in the first quarter of the reporting year. Development of revenues by region Q1 /12 Revenues in EUR million Change in % D/A/CH Eastern Europe Northern Europe Western Europe Southern Europe Europe Asia Australia & New Zealand America 8.7 (5.2) Others 2.4 (24.3) Total Distribution of revenues by region Asia 9.7% Southern Europe 8.2% Western Europe 29.6% Australia & America Others New Zealand 2.7% 0.7% 10.1% D/A/CH 26.7% Easter Europe 5.4% Northern Europe 6.8% D/A/CH region with strongest growth in Europe The development of business in the first quarter of /12 differed by region but, in total, the upward trend from the prior year continued. Revenues recorded by the Zumtobel Group in Europe increased 9.6% to EUR million (prior year: EUR million). The strongest growth with plus 19.0% was recorded in the D/A/CH region (Germany, Austria, Switzerland). Sound revenue development was registered, above all, in Switzerland and Germany. In the Eastern Europe and Northern Europe (Denmark, Finland, Norway, Sweden, Iceland) regions, the lack of noticeable momentum on the professional lighting business for the Zumtobel Group continued and revenues rose by only 3.7% and 0.1%, respectively. Western Europe (Great Britain, France, Benelux), the strongest contributor to Group revenues, grew by 7.5%. In Southern Europe (Italy, Spain, Greece, Turkey), sound development on the Italian market more than offset weaker demand in 6

7 Turkey and growth in this region reached 2.7%. The relative share of Europe in Group revenues remained nearly constant at 76.8% for the reporting period (prior year: 76.5%). In the Asia region (which consists primarily of China, Hong Kong, Singapore, India and the Middle East), revenues increased 20.1% to EUR 31.7 million (prior year: EUR 26.4 million). The American region was faced with negative currency translation effects and a still difficult economic environment, which led to a 5.2% decline in revenues to EUR 8.7 million. The Architectural Billing Index, a key indicator for commercial construction in the USA, equalled 45.1 in July and remained below 50 for the fifth time in succession. Any value under 50 is linked to expectations of a further decline in industry expenditures. Australia & New Zealand reported growth of 5.0% for the first quarter of /12. Dynamic development in Asia Earnings >> Adjusted EBIT reaches EUR 18.2 million >> Gross profit margin with 33.0% slightly below the prior year (33.4%) >> Strong increase in R&D and selling expenses >> Improvement in financial results >> Stable net profit with EUR 13.7 million Income statement in EUR million Q1 /12 Q1 2010/11 Change in % Revenues Cost of goods sold (218.7) (199.0) 9.9 Gross profit as a % of revenues SG&A expenses adjusted for special effects (89.4) (81.4) 9.8 Adjusted EBIT (0.3) as a % of revenues Special effects (100.0) EBIT (8.9) as a % of revenues Financial results (2.5) (3.5) (28.2) Profit before tax (4.7) Income taxes (2.0) (1.6) 29.5 Net profit/loss from discontinued operations 0.0 (1.3) (100.0) Net profit for the period Depreciation and amortisation Earnings per share (in EUR) (1.2) For information: EBITDA (EBIT plus depreciation and amortisation) amounted to EUR 30.9 million in the first quarter of /12. EBIT adjusted for special effects amounted to EUR 18.2 million for the first quarter of /12 and reflected the prior year level (EUR 18.3 million). The adjusted EBIT margin fell from 6.1% to 5.6%. Despite the increase in revenues, the gross profit margin declined slightly from 33.4% to 33.0%. This development resulted, above all, from stronger growth in the lower-margin luminaire business compared with the Components Segment. Personnel expenses included in production costs were constant in quarterly comparison at 17.5% of revenues, but the related costs for materials rose from 41.3% to 42.9%. In addition, development costs included in the cost of goods sold increased by 17.7% from EUR 11.0 million to EUR 12.9 million. This trend reflects the technological shift as well as the steady focus of the Zumtobel Group on innovation and new product development. Substantial increase in R&D expenditures 7

8 1 May bis 31 July Focus on expansion of sales activities In connection with the presentation of its medium-term planning at the end of April, the Zumtobel Group announced a significant increase in selling and R&D activities. These plans were reflected in higher selling expenses, which rose from EUR 73.2 million to EUR 80.7 million for the reporting period. The additional costs covered higher marketing expenditures as well as the expansion of the sales force, which was enlarged by more than 100 employees in year-on-year comparison. Despite wage and salary increases required by collective bargaining agreements, administrative expenses remained nearly unchanged at EUR 9.6 million (prior year: EUR 9.5 million). Other operating results, excluding special effects, of EUR 0.9 million (prior year: EUR 1.3 million) consisted primarily of license income from the LED business as in the prior year. No special effects were recognised in the first quarter of the reporting year (prior year: EUR 1.7 million). The write-up of non-current assets in the first quarter of 2010/11, which was reported under special effects, was related primarily to a EUR 2.0 million revaluation. This adjustment was recognised to a building written off in 2008/09, since the reasons for the original impairment charge no longer exist. The following table shows the Group s operating performance, excluding the above-mentioned special effects: Adjusted EBIT in EUR million Q1 /12 Q1 2010/11 Change in % Reported EBIT (8.9) thereof special effects (100.0) Adjusted EBIT (0.3) as a % of revenues Improvement in financial results Financial results improved by EUR 1.0 million over the first quarter of the previous year to minus EUR 2.5 million for the reporting period. Interest expense consisted primarily of interest on the current credit agreement and rose by EUR 0.6 million to EUR 2.8 million due to an increase in net debt. Other financial income and expenses totalled plus EUR 0.1 million (prior year: minus EUR 1.7 million) and comprised, above all, results from the fair value measurement of forward exchange contracts as of 31 July. Financial result in EUR million Q1 /12 Q1 2010/11 Change in % Interest expense (2.8) (2.2) 25.3 Interest income Net financing costs (2.4) (1.9) 26.8 Other financial income and expenses 0.1 (1.7) >100 Profit/loss from companies accounted for at-equity (0.2) 0.1 <(100) Financial results (2.5) (3.5) (28.2) Stable net profit for the period Profit before tax equalled EUR 15.7 million in the first quarter of /12 (prior year: EUR 16.5 million), and income tax expense amounted to EUR 2.0 million (prior year: EUR 1.6 million). Net profit in the prior year was negatively influenced by results of minus EUR 1.3 million from discontinued operations. This amount includes the effects from the discontinuation of the event lighting business (Space Cannon VH SRL) at the end of the second quarter of 2010/11. Net profit for the period rose slightly from EUR 13.7 million in the previous year to EUR 13.6 million for the reporting period. Earnings per share for the shareholders of Zumtobel AG (basic earnings per share based on 43.1 million shares) equalled EUR 0.31 (prior year: EUR 0.32 ). 8

9 Cash Flow and Asset Position >> Higher cash outflows from increase in working capital >> Investments in non-current assets rise to EUR 14.9 million (prior year: EUR 10.3 million) >> Free cash flow at prior year level >> Continued solid balance sheet structure Working capital totalled EUR million as of 31 July (prior year: EUR million). The increase in the first quarter of the reporting year resulted from the rising volume of business as well as higher inventories of raw materials and finished goods. The Zumtobel Group built up inventories by a higher amount than the growth in revenues to safeguard customer deliveries, but the expected stock reductions were not realised during the summer, in particular by the Components Segment. Working capital requirements rose from 19.8% in the first quarter of 2010/11 to 22.4%. In relation to annualised quarterly revenues, working capital requirements equal 21.6%. Working capital is therefore currently outside the Group s defined target corridor of 18% to 20%. The increase in working capital led to cash outflows of EUR 48.8 million (prior year: EUR 47.2 million). Factoring declined from EUR 48.1 million to EUR 43.1 million as of 31 July. Cash flow from operating results was EUR 2.9 million lower than the previous year at minus EUR 27.7 million (prior year: minus EUR 24.9 million). Higher cash outflows from increase in working capital Working Capital as % of rolling 12-month revenues 25% 22.4% 20% 18.4% 19.8% 19.9% 18.0% 18.4% 19.0% 18.6% 15% 15.8% 10% 5% 0% Q1 Q2 Q3 Q4 FY 2009/10 FY 2010/11 FY /12 Investments in non-current assets amounted to EUR 14.9 million for the first quarter of /12 (prior year: EUR 10.3 million) and included investments in tools for new products, expansion and maintenance investments as well as capitalised research and development costs (EUR 2.3 million). The expansion investments represent new production equipment for the luminaire plants in Dornbirn (Austria), Lemgo (Germany) and Les Andelys (France) as well as additional capacity in the Components Segment for the production of electronic ballasts in Dornbirn and LED modules in Jennersdorf (Austria). This resulted in negative free cash flow of minus EUR 37.6 million which, however, still represents a slight improvement over the previous year (minus EUR 38.3 million). Cash flow of EUR 17.0 million from financing activities (prior year: EUR 4.1 million) consisted primarily of the EUR 21.6 million dividend paid to the shareholders of Zumtobel AG (prior year: EUR 6.4 million) and the increased use of financing lines from the consortium credit agreement. As of 31 July, EUR 231 million of the available EUR 480 million were in use. Free cash flow at minus EUR 37.6 million Dividend of EUR 0.50 per share 9

10 1 May bis 31 July Balance sheet data in EUR million 31 July Total assets 1, ,020.5 Net debt Equity Equity ratio in % Gearing in % Investments Working capital As a % of rolling 12 month revenues Solid balance sheet structure The equity ratio declined from 37.1% on to 35.4%, above all due to the dividend payment. Net liabilities rose by EUR 63.9 million to EUR million and gearing the ratio of net liabilities to equity increased from 37.3% on to 54.2% as of 31 July. Guidance remains but uncertainty is increasing The past months were characterised by growing uncertainty over the possible effects of the current financial market turbulence and the massive sovereign debt in key industrial countries on the real economy. We are therefore monitoring economic developments intensely. For our Lighting Segment, we expect steady high demand over the coming months. The higher margin Components Segment has seen increasingly limited visibility during recent months and, from the current point of view, we cannot predict whether the present reserved demand will strengthen to produce the necessary growth during the coming autumn. Against this backdrop, our guidance for the /12 financial year remains in place (Group revenues approx. +10% and adjusted EBIT margin slightly higher than 6.4%), but we see substantially greater uncertainty over the further development of business. Dornbirn, 6 September Harald Sommerer Mathias Dähn Martin Brandt Chief Executive Officer Chief Financial Officer Chief Operating Officer 10

11 Income Statement in TEUR Q1 /12 Q1 2010/11 Change in % Revenues 326, , Cost of goods sold (218,739) (198,962) 9.9 Gross profit 107,591 99, as a % of revenues Selling expenses (80,722) (73,181) 10.3 Administrative expenses (9,565) (9,494) 0.7 Other operating results 922 2,988 (69.1) thereof special effects 0 1,715 (100.0) Operating profit 18,226 19,997 (8.9) as a % of revenues Interest expense (2,766) (2,208) 25.3 Interest income Other financial income and expenses 55 (1,728) >100 Profit/loss from companies accounted for at-equity (170) 108 <(100) Financial results (2,533) (3,527) (28.2) as a % of revenues (0.8) (1.2) Profit before tax 15,693 16,470 (4.7) Income taxes (2,035) (1,572) 29.5 Net profit from continuing operations 13,658 14,898 (8.3) Net profit/loss from discontinued operations 0 (1,268) (100.0) Net profit for the period 13,658 13, as a % of revenues thereof due to non-controlling interests >100 thereof due to shareholders of the parent company 13,530 13,584 (0.4) Average number of shares outstanding basic (in 1000 pcs.) 43,085 42,742 Average diluting effect (stock options) (in 1000 pcs.) Average number of shares outstanding diluted (in 1000 pcs.) 43,112 42,786 Earnings per share (in EUR) Basic earnings per share Diluted earnings per share Earnings per share from continuing operations (in EUR) Basic earnings per share Diluted earnings per share Earnings per share from discontinued operations (in EUR) Basic earnings per share 0.00 (0.03) Diluted earnings per share 0.00 (0.03) 11

12 Statement of Comprehensive Income in TEUR Q1 /12 Q1 2010/11 Change in % Net profit for the period 13,658 13, Currency differences 11,339 1,655 >100 Currency differences arising from loans (2,634) 697 <(100) Hedge accounting (735) 12 <(100) Taxes 184 (3) >100 thereof Hedge Accounting 184 (3) >100 Subtotal other comprehensive income 8,154 2,361 >100 thereof due to non-controlling interests thereof due to shareholders of the parent company 8,033 2,282 >100 Total comprehensive income 21,812 15, thereof due to non-controlling interests thereof due to shareholders of the parent company 21,563 15,

13 Balance Sheet in TEUR 31 July in % in % Goodwill 187, , Other intangible assets 51, , Property, plant and equipment 238, , Financial assets accounted for at-equity 4, , Financial assets 5, , Other assets 4, , Deferred taxes 35, , Non-current assets 527, , Inventories 205, , Trade receivables 221, , Financial assets 12, , Other assets 25, , Liquid funds 75, , Current assets 541, , ASSETS 1,068, ,020, Share capital 108, , Additional paid-in capital 335, , Reserves (82,049) (7.7) (119,818) (11.7) Net profit for the period 13, , Capital attributed to shareholders of the parent company 375, , Capital attributed to non-controlling interests 3, , Equity 378, , Provisions for pensions 56, , Provisions for severance compensation 33, , Provisions for other defined benefit employee plans acc. to IAS19 12, , Other provisions Borrowings 257, , Other liabilities Deferred taxes 11, , Non-current liabilities 373, , Provisions for taxes 22, , Other provisions 23, , Borrowings 24, , Trade payables 133, , Other liabilities 114, , Current liabilities 317, , EQUITY AND LIABILITIES 1,068, ,020,

14 Cash Flow Statement in TEUR Q1 /12 Q1 2010/11 Operating profit from continuing and discontinued operations 18,226 18,729 Depreciation and amortisation 12,701 9,635 Gain/loss from disposal of fixed assets Results from discontinued operations 0 (1,127) Cash flow from operating results 30,988 27,274 Inventories (12,422) (12,187) Trade receivables (36,318) (18,952) Trade payables (4,713) (17,559) Prepayments received 4,651 1,543 Change in working capital (48,802) (47,155) Non-current provisions (1,406) (1,564) Current provisions (1,727) 1,266 Other current and non-current assets and liabilities (3,639) (7,206) Change in other operating items (6,772) (7,504) Taxes paid/received (3,152) 2,521 Cash flow from operating activities (27,738) (24,864) Proceeds from the sale of non-current assets Capital expenditures on non-current assets (14,912) (10,326) Change in non-current and current financial assets 4,942 (3,293) Cash flow from investing activities (9,895) (13,485) FREE CASH FLOW (37,633) (38,349) Change in net borrowings 41,458 11,550 thereof restricted cash (5) (7) Dividends (22,082) (6,418) Exercise of options (378) 474 Interest paid (2,327) (1,813) Interest received Cash flow from financing activities 16,951 4,093 Effects of exchange rate changes on cash and cash equivalents 2,204 1,115 CHANGE IN CASH AND CASH EQUIVALENTS (18,478) (33,141) Cash and cash equivalents at the beginning of the period 70,757 84,698 Cash and cash equivalents at the end of the period 52,279 51,557 Change absolute (18,478) (33,141) 14

15 Statement of Changes in Equity 1st Quarter /12 in TEUR Share capital Additional paid-in capital Attributed to shareholders of the parent company Other Currency Reserves reserve Hedge accounting Reserve Reserve for stock IAS 19 options Net profit for the period Total Noncontrolling interests Total equity 108, ,387 (25,749) (51,096) (1,441) 18,418 (59,950) 51, ,344 3, ,652 +/- Additions to reserves , (51,025) /- Total comprehensive income ,584 (551) ,530 21, ,812 +/- Stock options exercises 0 (378) (378) 0 (378) +/- Stock options addition/reversal /- Dividends 0 0 (21,552) (21,552) (530) (22,082) 31 July 108, ,009 3,724 (42,512) (1,992) 18,681 (59,950) 13, ,240 3, ,267 1st Quarter /1 /11 Attributed to shareholders of the parent company in TEUR Share capital Additional paid-in capital Other Reserves Currency reserve Hedge accounting Reserve for stock options Reserve IAS 19 Net profit/loss for the period Total Noncontrolling interests Total equity , ,597 52,105 (48,737) (2,594) 17,270 (54,858) (69,945) 336,588 3, ,413 +/- Additions to reserves 0 0 (69,945) , /- Total comprehensive income , ,584 15, ,991 +/- Stock options exercises /- Stock options addition/reversal /- Dividends 0 0 (6,418) (6,418) 0 (6,418) 31 July , ,071 (24,258) (46,464) (2,585) 17,615 (54,858) 13, ,855 3, ,809 The balance sheet position reserves comprises other reserves as well as the currency reserve, the reserve for hedge accounting, the reserve for stock options and the IAS 19 reserve. 15

16 Notes Accounting and Valuation Methods The condensed interim financial statements as of 31 July were prepared in accordance with the principles set forth in International Financial Reporting Standards (IAS 34, Interim Financial Reporting). The company has elected to make use of the option set forth in IAS 34 and provide selected explanatory notes. The condensed interim financial statements as of 31 July were neither audited nor reviewed by a chartered accountant. These unaudited condensed interim financial statements were prepared in accordance with all IFRS/IAS issued by the International Accounting Standards Board (IASB) as well as all interpretations (IFRIC/SIC) of the International Financial Reporting Interpretations Committee and Standing Interpretations Committee that were valid as of the balance sheet date and have been adopted by the European Union through its endorsement procedure. The accounting and valuation methods applied as of 31 July remain basically unchanged. Additional information on these methods is provided in the consolidated financial statements as of. In order to further improve the clarity and informative value of these financial statements, individual positions were combined on the income statement and balance sheet and are reported separately in the notes. The amounts in the tables are presented in thousand Euros (TEUR), unless indicated otherwise. The use of automatic data processing equipment can lead to rounding differences. The quarterly financial statements of the companies included in the consolidated financial statements were prepared on the basis of uniform accounting and valuation principles. Foreign Currency Translation The major currencies used to translate the financial statements of subsidiaries into the euro are as follows: Average exchange rate Income Statement Closing rate Balance sheet 1 EUR equals 31 July 31 July July AUD CHF USD SEK GBP Consolidation Range The condensed consolidated interim financial statements include all major Austrian and foreign companies that are controlled by Zumtobel AG. The changes in the consolidation range during the interim financial period are shown below: Consolidation Method Consolidation Range full at equity Total Deconsolidated during reporting period Liquidated during reporting period (1) 0 (1) 31 July >> Zumtobel Residential Lighting srl was liquidated during the first quarter of the /12 financial year. >> In the third quarter of 2009/10 the majority shareholders of z-werkzeugbau gmbh exercised their option to acquire the remaining 30% of the company. The shares have not yet been transferred. 16

17 Notes to the Income Statement The following comments explain the major changes to individual items in relation to the comparable prior year period. Seasonality Sales volumes are generally higher during the first two quarters than in the second half-year for seasonal reasons; in particular, the third quarter falls significantly below the average. This distribution reflects the Group s dependency on developments in the construction industry as well as the seasonal distribution of business in this sector. The cyclical fluctuations in 2010/11 were less extreme due to the market recovery in the late cyclical lighting business during that year. Revenues Revenues rose by 9.3% over the comparable prior year period to TEUR 326,330 in the first quarter of /12. Expenses The income statement was prepared in accordance with the cost of sales method. The cost of goods sold (incl. development expenses), selling expenses (incl. research expenses) and administrative expenses as well as other operating results include the following categories of expenses and income: 1st Quarter /1 /12 in TEUR Cost of goods sold Selling expenses Administrative expenses Other operating results Cost of materials (140,076) (649) (19) 0 (140,744) Personnel expenses (56,952) (43,700) (7,103) 7 (107,748) Depreciation (11,041) (1,437) (223) 0 (12,701) Other expenses (16,178) (33,781) (3,358) 5 (53,312) Own work capitalised 2, ,583 Internal charges 1,577 (2,613) 1, Total expenses (220,087) (82,180) (9,667) 12 (311,922) Other income 1,348 1, ,818 Total (218,739) (80,722) (9,565) 922 (308,104) Total 1st Quarter /1 /11 in TEUR Cost of goods sold Selling expenses Administrative expenses Other operating results Cost of materials (123,231) (1,117) (15) 20 (124,343) Personnel expenses (52,135) (38,697) (7,118) (218) (98,168) Depreciation (10,139) (1,296) (172) 1,972 (9,635) Other expenses (19,264) (30,769) (3,647) (86) (53,766) Own work capitalised 3, ,405 Internal charges 1,439 (2,783) 1,351 (7) 0 Total expenses (199,977) (74,622) (9,589) 1,681 (282,507) Other income 1,015 1, ,307 3,858 Total (198,962) (73,181) (9,494) 2,988 (278,649) Total 17

18 The cost of goods sold includes development costs of TEUR 12,891 (prior year: TEUR 10,950). Development costs totalling TEUR 2,297 were capitalised during the reporting period (prior year: TEUR 3,113), and the amortisation of capitalised development costs equalled TEUR 2,800 (prior year: TEUR 2,101). Other Operating Results in TEUR Q1 /12 Q1 2010/11 Government grants License revenues 668 1,211 Special effects 0 1,715 Write-up to non-current assets 0 1,972 Restructuring 0 (261) Litigation 0 4 Miscellaneous (73) (45) Total 922 2,988 Similar to the first quarter of the previous year, the government grants represent subsidies that were recognised to profit or loss. The composition of license income is also the same as the first quarter of the prior year and consists of license income from the LED business. The first quarter of the prior year includes a revaluation of TEUR 1,972 to a non-current asset (building) that was reported under special effects. This revaluation was recognised because the reasons for an impairment loss recorded in 2008/09 ceased to exist. In addition, the first quarter of 2010/11 includes restructuring expenses of TEUR 261 related to a cost reduction programme that was launched in 2008/09. Miscellaneous items represent the net total of income and expenses arising from ordinary business operations, which cannot be clearly allocated to other functional areas. Interest Expense Interest expense consists primarily of interest on the current credit agreement. Other Financial Income and Expenses in TEUR Q1 /12 Q1 2010/11 Interest component as per IAS 19 less income on plan assets (1,003) (867) Foreign exchange gains and losses 23 1,215 Market valuation of financial instruments 1,035 (2,076) Total 55 (1,728) Foreign exchange gains and losses consist above all of effects from the valuation of receivables and liabilities that are denominated in a foreign currency. The market valuation of financial instruments shows the results from the valuation of forward exchange contracts at fair value as of the balance sheet date for these interim financial statements. 18

19 Income Taxes The classification of income taxes into current and deferred taxes is shown in the following table: in TEUR Q1 /12 Q1 2010/11 Current taxes (2,499) (1,970) thereof current year (2,415) (1,946) thereof prior years (84) (24) Deferred taxes Income taxes (2,035) (1,572) Net Profit/Loss from Discontinued Operations In the prior year this position includes the effects from the discontinuation of the event lighting business, which took place during the second half of 2010/11. Earnings per Share Basic earnings per share were calculated by dividing net profit for the period by the average number of shares outstanding as of the balance sheet date for these interim financial statements. Diluted earnings per share reflect the assumption that that the options granted under the stock option programmes (SOP/MSP) will be exercised. These shares are included in the calculation of the average number of shares outstanding. 1st Quarter /1 /12 in 1000 pcs. Balance Sheet Date Average 1 May 42,821 42,821 Stock options exercises July 43,104 43, /1 /11 Financial Year in 1000 pcs. Balance Sheet Date Average 1 May ,725 42,725 Stock options exercises July ,788 42,742 Stock options exercises ,821 42,787 19

20 Notes to the Statement of Comprehensive Income Currency Differences This position comprises translation effects from the conversion of the financial statements of subsidiaries as well as the effects of foreign currency-related adjustments to goodwill following the application of IAS 21 (The Effects of Changes in Foreign Exchange Rates). Currency Differences arising from Loans The currency differences from loans are attributable to long-term SEK and GBP loans that are classified as a net investment in a foreign operation and must therefore be reported under comprehensive income. In addition, this position includes currency differences resulting from an interest rate hedge. Notes to the Balance Sheet The following comments refer to major changes in individual items compared to the balance sheet date on. Goodwill In accordance with the application of IAS 21, foreign currency-based adjustments of TEUR 4,006 were made to goodwill during the first quarter of /12 (prior year: TEUR 1,425) without recognition to profit or loss. These foreign exchange effects are allocated to the Lighting Segment for segment reporting. Other Intangible Assets The change resulted chiefly from the capitalisation of acquired software licenses. Property, Plant and Equipment The increase resulted primarily from investments at various production locations as well as the translation of property, plant and equipment at the exchange rates in effect on the balance sheet date. Non-current Financial Assets The most important item included under this position is the non-current portion of the receivable arising from the sale of the old factory in Spennymoor during December Other Non-Current Assets This position consists primarily of capitalised reinsurance for the fulfilment of pension commitments. Inventories The Group has an off balance sheet commitment of TUSD 15,542 with a supplier to purchase LED modules, which must be fulfilled by 28 February Provisions for Pensions The decline in the provisions for pensions resulted from pension payments made during the first quarter of /12. 20

21 Non-Current Financial Liabilities Non-current financial liabilities were higher during the reporting period, above all due to the increased use of the financing line provided by the consortium credit agreement. The amount drawn under this agreement rose from TEUR 186,000 to TEUR 231,000. Other Current Provisions The development of this position was related primarily to the use of the provision for restructuring. Current Financial Liabilities The change in current financial liabilities reflected the use of short-term working capital credit lines. Other Current Liabilities The increase in this position resulted mainly from higher amounts due to taxation authorities. Notes to the Cash Flow Statement Cash flow was determined on a monthly basis in accordance with the indirect method. The resulting monthly cash flows were translated at the applicable average monthly exchange rate and then aggregated, while the balance sheet positions were translated at the exchange rate in effect on the respective closing date. Individual positions on the cash flow statement therefore differ significantly from the respective balance sheet positions, above all under cash flow from operating activities. In agreement with the indirect method, operating profit is adjusted for the effects of non-cash transactions (e.g. depreciation and amortisation) as well as income and expenses that relate to investing or financing activities. The development of cash flow from operating activities was influenced by the increase in inventories as well as a higher level of trade receivables and lower trade payables. These changes were related to the seasonal increase in working capital, whereby the increase in inventories exceeded the growth in revenues. The higher inventory levels reflect the rising scope of business as well as measures to protect the company s supply capability. The changes in other non-current and current assets and liabilities resulted above all, from a reduction in employee-related liabilities. Cash flow from investing activities consisted primarily of investments for development projects as well as property, plant and equipment purchased for various plants. The change in non-current and current financial assets resulted chiefly from the valuation of derivatives. The main components of cash flow from financing activities are the increase in the amount drawn from the consortium credit agreement and the dividend paid to the shareholders of Zumtobel AG. Transition to Cash and Cash Equivalents in TEUR 31 July 31 July 2010 Liquid funds 75,150 86,255 70,150 Not available for disposal (286) (269) (9) Overdrafts (22,585) (15,229) (18,584) Cash and cash equivalents 52,279 70,757 51,557 21

22 Notes to the Statement of Changes in Equity Dividend The annual general meeting on 22 July approved the payment of a EUR 0.50 dividend per share. On 29 July a total of TEUR 21,552 was distributed to the shareholders of Zumtobel AG. Other Reserves This position includes profit carried forward. Currency Translation Reserve This reserve includes the currency differences resulting from the application of the historical exchange rate on the date of initial consolidation and the exchange rate in effect on the balance sheet date for companies that do not report in the euro as well as differences resulting from the translation of the income statement at the monthly average exchange rate and the exchange rate in effect on the balance sheet date. Also included here are the currency differences arising from long-term Group loans granted in SEK and GBP, which are classified as net investments in foreign operations in accordance with IAS 21. This reserve also contains the foreign currency effects of an interest rate hedge and foreign currency-related adjustments to goodwill. Hedge Accounting The changes in equity from the application of hedge accounting reflect the changes in the fair value of derivative contracts that are recorded directly in equity as well as amounts transferred from equity to profit or loss following the exercise or realisation of contracts and the related deferred taxes. Stock Option Programme and Development of Treasury Shares in pcs. Share buyback (to ) 1,539,211 Exercised (to ) (860,658) 678,553 Exercised (282,971) 31 July 395,582 Total A total of 22,047 stock options were exercised from the Stock Option Programme (SOP) during the first quarter of /12 (prior year: 63,320.). In connection with the Matching Stock Programme (MSP), 260,924 shares were distributed to the participating employees without return compensation. Reserve for Stock Options in TEUR SOP MSP Total 15,985 2,433 18,418 Addition through profit or loss July 15,985 2,696 18,681 The Stock Option Programme (SOP) was replaced by the Matching Stock Programme (MSP) in No further options were allocated from the SOP. 22

23 The addition to the MSP is accrued and recognised through profit or loss over a period of two years. The accrual for the first quarter of /12 amounted to TEUR 263 (prior year: TEUR 345). IAS 19 Reserve This position comprises the actuarial losses recorded in accordance with IAS 19. Segment Reporting The subsidiary groups form the primary areas of business for segment reporting by the Zumtobel Group: the Lighting Segment (lighting solutions, interior and exterior lighting, electronic-digital lighting and room management systems) and the Components Segment (electronic and magnetic lighting components). The transfer of goods and services between the two divisions is based on ordinary market conditions. The segment information is principally based on the same presentation, accounting and valuation methods used to prepare the consolidated financial statements. In accordance with the management approach prescribed by IFRS 8, operating profit (EBIT) a key indicator used for internal reporting is included as part of the segment information. The segment assets allocated to the divisions include property, plant and equipment that can be directly assigned as well as intangible assets and working capital (excluding accrued interest, tax receivables and tax liabilities). The column reconciliation comprises assets and the related income statement items that could not be allocated to either of the two segments as well as property, plant and equipment, financial liabilities and taxes that are used by or involve both segments. in TEUR Q1 /12 Lighting Segment Components Segment Reconciliation Group Q1 2010/11 Q1 2009/10 Q1 /12 Q1 2010/11 Q1 2009/10 Q1 /12 Q1 2010/11 Q1 2009/10 Q1 /12 Q1 2010/11 Q1 2009/10 Net revenues 236, , , , ,205 87,848 (20,037) (19,113) (16,750) 326, , ,029 External revenues 235, , ,680 90,255 87,183 71, , , ,029 Inter-company revenues ,034 19,022 16,616 (20,164) (19,220) (16,867) Operating profit/loss 10,751 10,644 7,039 10,681 13,184 15,334 (3,206) (3,831) (2,742) 18,226 19,997 19,631 Investments 8,259 5,724 5,535 5,245 4,176 2,197 1, ,912 10,326 7,769 Depreciation (7,833) (4,722) (6,398) (4,484) (4,593) (4,017) (384) (320) (299) (12,701) (9,635) (10,714) in TEUR 31 July July July July 2010 Assets 669, , , , , , , , ,284 1,068,964 1,020, , July July July July 2010 Headcount (fulltime equivalent) 5,474 5,322 5,155 2,287 2,368 2, ,887 7,814 7,329 The number of employees reported in the above table includes temporary employees working in the Zumtobel Group. The elimination of inter-segment revenues is shown in the reconciliation column. 23

24 The transition column comprises the following items: Transition in TEUR Q1 /12 Q1 2010/11 Group parent companies (3,553) (3,956) Group entries Operating profit/loss (3,206) (3,831) The Group parent companies represent companies that provide administrative or financing services for the entire Group and cannot be allocated to a specific segment. The transition to operating profit includes Group entries for the elimination of interim profits in current and non-current assets. Transition in TEUR 31 July Assets used by more than one segment 146, ,887 Group parent companies 42,979 43,386 Group entries (50,186) (54,477) Assets 139, ,796 The decline in the assets used by more than one segment is related, above all, to the decline in cash and cash equivalents. No single external customer is responsible for more than 10% of total revenues. Related Party Transactions Related parties include the Management Board and Supervisory Board of Zumtobel AG. The company had no business relationships with related parties as of the closing date for the interim financial statements on 31 July. Supply and delivery transactions are conducted with associated companies at normal market conditions. Contingent Liabilities and Guarantees The Zumtobel Group has issued bank guarantees totalling TEUR 10,221 ( : TEUR 9,492) for various liabilities. Subsequent Events No significant events occurred after the balance sheet date. Dornbirn, 6 September The Management Board Harald Sommerer Mathias Dähn Martin Brandt Chief Executive Officer (CEO) Chief Financial Officer (CFO) Chief Operating Officer (COO) 24